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What a difference a day makes! The announcement of a new deal for the European Stability Mechanism (ESM) and the creation of a eurozone bank supervisor following the 28/29 June EU summit triggered a very sharp one-day rally in European equities on the last trading day of the month.

Being underweight equities in general and very underweight European equities in particular, this rally hit the performance of my self-invested pension portfolio (Sipp).

In June my Sipp rose 1.4% in value, bringing the gain year-to-date to 5.1%. However, boosted by the last-day spurt, my benchmark (50% UK equities, 25% eurozone equities, 25% UK gilts) jumped by 3.7% on the month, bringing the gain for the first half of the year to 0.4%.

Beaten by the benchmark

This is the first month of the year that my Sipp performance has lagged that of my benchmark, reducing the excess performance to 4.7% for the year so far and to 6.5% over the past 12 months.

The one bright spot in the portfolio was the performance of the three bond funds I bought in May (see previous article), which outperformed the UK gilt market on the month. In June I doubled these positions, and they now account for 19.5% of my portfolio, reducing the cash position to 25%.

Another missed opportunity

I do not trust this one-day – albeit spectacular – response to the EU summit. This was the 19th summit since the eurozone crisis began and it represents another missed opportunity. More significantly, it has demonstrated the serious political fragmentation of Europe that is currently undergoing.

It also witnessed a potentially significant shift in the political centre of gravity within Europe, with the emergence of a nascent alliance of France, Italy and Spain – a 'HoMontJoy' (François Hollande, Mario Monti and Mariono Rajoy) axis to replace the 'Merkozy' Franco-German alliance so long at the political heart of the eurozone.

Among the mandarins of Europe there is clearly a strong appetite for fundamental measures to address the euro’s structural fault lines. The heads of the ECB, the European Commission, the EU Council and the Eurogroup presented proposals to the EU summit that would address the four pillars for a workable monetary union.

These pillars are an integrated budget policy, deeper economic coordination, a banking union and the 'democratic legitimacy' for a transfer of powers to the European centre.

The rally unravels

Instead of a wholesale agreement that could have demonstrated a commitment to the euro, we were given the absolute minimum – the use of the ESM to support the recapitalisations of the banking system directly, supported by a new eurozone banking supervisor. And even this bare minimum began to unravel within 24 hours as political leaders went home and gave their own, clearly unaligned versions of what had been agreed.

The outcome clearly represented a victory for HoMontJoy, who demanded more bailout funds without strings before any transfer of powers. Merkel was the loser, wanting the transfer of powers first.

Merkel, Neville Chamberlain like, went home and tried to reassure her domestic audience that ESM bailout funds would come with conditionality. Monti and Rajoy in turn played down conditionality, while the Dutch and the Finnish effectively said 'over my dead body' would they support the summit agreement.

Good article. Thank you. Albeit that the overall picture is a depressing one. For those of us who have significant amounts of money invested in equities spread across UK, Europe and US and are expecting to retire in the next 10-15 years there is something of a dilemma. If we are witnessing total collapse of the western world's fatally flawed economic system which will plunge it's population into decades of poverty and falling living standards then one is tempted to sell everything and retire to a fortified home on the West coast of Scotland with a brace of shotguns and a good supply of ammunition. On the other hand a more optimistic view might be that at last our hopelessly short sighted, inept and self-interested politicians might eventually be forced to accept some sensible advice and address the situation in a way that will; eventually, lead to long period of prosperity. If this second scenario were to emerge then history may show that the present time was the most rewarding point to be invested in equities for over a century. Remember one of Warren Buffet's most famous remarks "be greedy when other are fearful". The rewards for a young investor looking to the longer term (and I mean long - say 20 years or more) could be spectacular. The dilemma for the older investor is whether to stay invested hoping the recovery will be within a decade or to sell now. I'd be interested to hear the views of the article's author Rob Kyprianou or any of our better-informed contributors.

In fact this is far from a successful outome for Spain. As can now be seen the loan does in fact come with pages and pages of conditions hence the recent hike in VAT and further cuts in spending. Merkel has in fact given away nothing and the effect of further cuts on an already depressed economy with 25% unemployment will only send Spain in the same direction as Greece. The only obvious wayout is to leave the Euro. But the as can be seen by the ever more ludicrous ranting from the Spainish prime minister (apparently this whole saga is a 'victory' for Spain) the chances of that happening is as remote as ever. In the meantime the destruction of jobs, businesses and peoples lives goes on apace together with rising levels of civil unrest all to protect the elites dream of the Euro.

The question is for how much longer are the ordinary citizens of Europe prepared to let this continue in order to allow the Euro dreams of the people at the top to be maintained?

Kyprianou is soooo depressed because his dream of a United States of Europe doesn't look as if it's going to happen after all. The mandarins have not been able to turn the thirty or more distinct, historic peoples of the landmass into a beige mob of docile peons quick enough. Oh dear, how sad for the globalist banksters and their unaccountable, well-heeled enforcers in Brussels and Strasbourg.

And how good for the other 300m of us. Let hundred flowers bloom! More and more devolution, microstates, languages; more ancient sovereignties recovering the autonomy and dignity that was temporarily removed when the old imperial powers exhausted themselves in 1945 and the new barbarian coinquerors moved in from America and Russia. Now the USSR is no more, the USA is heading for dissolution and a multipolar world of glorious plurality emerges, not least on the old continent as the last flickering flame of gigantomaniac nation-killing dies-- not in a welter of blood but with a whimper of bailout and trade war.

The only way western ecoinomies will discover a way out of their malaise is by every nation trying its own solution, so we can tell which works best. Yoking them all together in an 'ever closer union' is hopeless. The EMS's coillapse presages the death of the pretence that 'Europe' is or ever could be one political and economuic unit. Free trade area or areas? Sure, as long as you can pull out. Bring back EFTA, but for the rest-- better off out! Sooner the better, and no English taxes to featherbed Mediterranean lotus eaters and liars.

Mr Morgan, with respect I don't think the buying of equities at these levels will prove to be a wise move. Although everyone is highlighting Europe as the problem, in fact the issue is worldwide. What issue, to much debt. The debt problem is not being tackled. Some Governments are trying austerity and some creating more debt, the latter includes the USA. Equities are holding up because of the action of the Fed. and major banks, but printing money will not solve the problem.

Where companies have solid assets and businesses, buying into such companies now, or on a dip, will result in a rise in price to compensate for the dilution of the currency, never mind the divis. True the value might fall a bit but relatively it should keep pace with the dilutionary effect of counterfeiting.

Furthermore, it will pay, if the right company, a darn sight more than the thieving bwanksters, perhaps by a factor of more than 10, perhaps even 20 and more, as some bwankers pay zilch, diddly squat, zero, niks, nothing, de nada, naint, niente, null, niente, or as a client used to say **ck all minus 50%. So any payment is a zillion % better! In some instances the bwankers even charge you for having any money with them, so the result would be more than quad zillion times better.

You offer a black and white (or in the modern day jargon - risk on / risk off) alternative to select from. Life is likely to be more complicated unfortunately with many outcomes that come between these 2 choices. There is also alternative versions of what is a good or bad outcome - e.g. read William Phillips comment to this and precious articles; he clearly regards a poltical disintegration of Europe as a good outcome. The path is also likely to be one full of proverbial twists and turns. As investors we always live in uncertain times and these are particularly uncertain times where the various possible outcomes could be dramatic for our savings.

At the heart of the problem is a banking and debt crisis in the West with significant negative economic repurcussions. It is overlayed by a potentially significant event risk - the break up of the euro in a backdrop of political fragmentation in Europe. These are challenges with multi-year consequences. How we come out it is still not clear and I believe that long term investors should remain cautious while events play out. There is no need to back any particular possible outcome right now - we have the time to observe as the problems are deep rooted and will play out over years not weeks.

Being a Sipp fund holder who plans to start draw down in 4 years time with most of the fund in equities and bonds I am coming to the realisation that maintaining its current value assuming an average of 3% inflation is the very best i can hope for..does any body out there agree or am I smoking dope